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THE COST OF BEING GAY

Now that the Defense of Marriage Act, the federal law that defined marriage as a union between one man and one woman, has been dismantled, many same-sex couples will gain access to a long list of federal benefits that were previously only available to their opposite-sex peers.

An article in print and on The Times’s Web site outlines how same-sex couples will be affected. Here are more details.

Federal income taxes. As the story notes, married couples living in states where same-sex marriage is legal will be able to file joint federal returns. That should save some couples money, especially when one person earns much less than the other or does not work at all. High-income couples with two working spouses will probably pay more.

That said, filing jointly can make even lower-income couples ineligible for certain tax savings, like the earned-income tax credit. Ultimately, the tax consequences will depend on where couples live and what their income and particular circumstances are.

Couples who would have saved significant sums by filing jointly might want to consider amending their recent tax returns. Such amendments have been permitted for the last three tax years, according to Patricia Cain, a professor at Santa Clara University School of Law and an expert on sexuality and federal tax law. That means many taxpayers can refile for tax years 2010, 2011 and 2012. The three-year clock started on April 15 for people who filed on or before that date, she said, but those who received a filing extension have three years from the date they filed. Read more…

Edith Windsor, the plaintiff in the Defense of Marriage Act case, appeared on the steps of the Supreme Court after the ruling.Credit Christopher Gregory/The New York Times

Today’s Supreme Court decisions on gay marriage raise new questions about the expansion of rights and benefits to same-sex couples. Tara Siegel Bernard, in her series on this blog and in Your Money columns, has examined the complicated personal finance issues surrounding gay marriage and Social Security, income and estate taxes, health insurance and other factors that will change along with marriage laws. We have gathered the most relevant articles and blog posts here.

However Justices Rule, Issues Remain The outcome of the cases before the Supreme Court does not necessarily resolve all the complicated financial and legal hurdles that confront same-sex couples.

The High Price of Being a Gay Couple A comparison of the extra health, legal and other costs borne by a hypothetical gay couple whose financial situation is otherwise similar to a heterosexual couple’s.

Now that Delaware and Minnesota have legalized gay marriage, there are 12 states where same-sex couples can marry. And in the next few weeks, the Supreme Court is expected to weigh in on a constitutional challenge to the Defense of Marriage Act, which defines marriage as between one man and one woman.

Given all of the momentum on gay rights in recent years, it’s easy to overlook the fact that gay workers lack a basic but crucial protection: there is still no federal law that explicitly protects employees from job discrimination on the basis of their sexual orientation or gender identity, which is the subject of this week’s Your Money column.

A patchwork of state and local laws, along with court and agency decisions, provides some protections. But gay rights advocates say what’s really needed is a federal law.

This week’s Your Money column tries to envision how life may change for same-sex couples if the federal law that bans gay marriage is struck down.

Some background: Two potentially life-altering gay rights cases are being presented before the Supreme Court this coming week. One concerns the portion of the Defense of Marriage Act that defines marriage between one man and one woman, and, as a result, denies gay couples a long list of federal benefits that heterosexual married couples automatically receive. The other case challenges Proposition 8, a California ballot initiative banning same-sex marriage.

I tried to sketch out what would be at stake for one of the first gay couples that I interviewed for The Times, back when we started tracking all the extra costs and legal complications that gay couples face. If DOMA were overturned, these two men, who live in New York, would save about $7,000 in federal income taxes, Nor would they be taxed on the value of their health insurance, among a variety of other benefits.

How would your financial and legal life change? Please share your thoughts in the comment section below.

For a couple of years now, we have been collecting information on what domestic partner benefits companies offer to their gay and lesbian employees. We plan to continue expanding the chart. Use the form below to tell us about your employer’s policy.

Gay couples face a host financial and legal complications because of the federal law that bans same-sex marriage. As a result, they often end up having to pay more for a variety of things — tax preparation, health benefits and estate planning, among other things.

So it’s not terribly surprising that the law complicates things for same-sex partners’ employers, too, especially when a couple’s union may be recognized in a particular state, but not in the eyes of the federal government. Not only does that leave plenty of room for error in the administration of employee benefits, it also forces employers to treat their employees differently simply because of their sexual orientation.

As a result, more than 200 companies — among them giants like Citigroup, Apple, Mars and Amazon — as well as city governments, law firms and others, are arguing that the law that bans same-sex marriage imposes serious administrative and financial costs on their operations. The companies filed a supporting brief with the Supreme Court on Wednesday, urging it to overturn a section of the Defense of Marriage Act that denies federal benefits and recognition to same-sex couples.

“It puts us, as employers, to unnecessary cost and administrative complexity, and regardless of our business or professional judgment forces us to treat one class of our lawfully married employees differently than another, when our success depends upon the welfare and morale of all employees,” they wrote in the brief.

We’ve documented these inequities and complications as part of the “Cost of Being Gay” series on Bucks. For instance, gay employees who add their partners to their health benefits are taxed on the value of that coverage (if the partner is not considered a dependent) since their unions are not federally recognized. Opposite-sex married couples are not subject to the tax, so some employers have attempted to equalize the playing field by covering the extra costs for same-sex employees. We’ve tracked these efforts on a chart, which can be found here.

We’ve also written about the errors that can arise when organizations have to keep track of those extra taxes, including Yale University‘s failure to withhold the proper amount of income for a group of workers.

TD Bank is the latest employer to pay the extra taxes that gay and lesbian employees must pay when their employer pays for domestic-partner health benefits.

Under federal law, employer-provided health benefits for domestic partners are counted as taxable income, if the partner is not considered a dependent. The tax owed is based on the value of the partner’s coverage paid by the employer. Married heterosexual workers don’t have to worry about this tax.

To equalize the tax impact, TD Bank will make a one-time payment at the end of each year to gay and lesbian employees who have enrolled their domestic partners in the bank’s health benefits. The payment will be equal to the extra taxes the couple pays for benefits over the year.

TD Bank said the tax equalization will take effect on Jan. 1

Robert Pompey, head of commercial management administration at the bank and co-chairman of its Lesbian, Gay, Bisexual, Transgendered and Allies Committee, said in a press release that “TD Bank is committed to building an inclusive, barrier-free workplace where every employee feels valued, respected and supported. Offsetting these extra taxes for our L.G.B.T. employees makes us more competitive in the hunt for great talent and it’s the right thing to do.”

TD Bank has roughly 1,300 branches, concentrated in the Northeast and Mid-Atlantic regions.

Bucks keeps a running list of companies that equalize benefits. We’ll be adding TD Bank to the list of financial services companies.

The recent decision by a federal appeals court regarding the Defense of Marriage Act suggests gay couples may want to file something known as a protective refund claim with the Internal Revenue Service in the event the Supreme Court overturns the law, according to accounting experts.

The Court of Appeals for the Second Circuit in New York struck down the law’s definition of marriage as a union between a man and a woman as unconstitutional. The decision was the second by a federal appeals court striking down DOMA, as the law is known. The law’s constitutionality is expected eventually to be considered by the United States Supreme Court.

If the high court invalidates DOMA, legally married same-sex couples will be able to file claims for refunds of federal tax overpayments, said Janis Cowhey McDonagh, a partner at Marcum LLP in New York and a specialist in the firm’s national LGBT and non-traditional family practice.

Currently, same-sex marriage is recognized by six states — New York, Connecticut, Iowa, Massachusetts, New Hampshire, Vermont — and the District of Columbia. In addition, roughly 18,000 same-sex couples were married in California between June 16 and Nov. 4 of 2008, when voters passed Proposition 8, which approved a constitutional amendment restricting marriage to one man and one woman. Those marriages are valid.

Patricia Cain, a law professor at Santa Clara University and an authority on legal issues faced by same-sex couples, said others might want to consider filing a protective claim, too. Read more…

A proposed rule would extend health insurance to the children of gay people who are partnered with federal employees. But the domestic partners themselves would still be blocked from coverage because of the federal law that defines marriage as between one man and one woman.

The rule, proposed by the Office of Personnel Management last week, was written in response to a 2009 memo by President Obama that asked the agency’s director to figure out where it was possible to extend benefits to qualified same-sex partners of federal workers and their families under the confines of the current law.

The proposal is significant because same-sex couples often have trouble establishing legal ties to their children, as I pointed out in a column published on Saturday. Many states only allow one parent to form legal links to a child, which often leaves both the parent and child vulnerable. The child, for instance, may be unable to receive insurance through the employer of a nonbiological parent, which can be a particularly big burden if that parent is the sole breadwinner. Read more…

This week’s Your Money column discusses the many challenges that same-sex couples encounter when seeking to establish legal ties to children they’re raising together.

A new report on the topic, written by three research and advocacy groups, points out that 30 states do not have laws that allow both same-sex parents to adopt, while six states impose restrictions or outright bans. Even families living in states that recognize their relationships can still run into trouble as soon as they travel or move to a state with different laws.

The lack of legal recognition leaves these families vulnerable, financially, legally and emotionally. A child with no legal connection to a parent who died or was disabled, for instance, would not be eligible for certain federal benefits — something that children of most heterosexual parents receive automatically. The report, produced by the Movement Advancement Project, the Family Equality Council and the Center for American Progress, also outlines the many other rights, benefits and legal responsibilities that are at stake when legal ties cannot be established.

If you are raising children with a same-sex partner, how did you establish the legal relationship of both parents to the children? Please share your thoughts and experiences in the comment section.

A software glitch involving the new health care law may mean that some smokers won’t bear the full brunt of tobacco-user penalties that could have made their premiums much higher, at least for the first year.Read more…